The staff of the Missouri Public Service Commission raised “grave concerns” that permitting TelexFree’s telecom registration to remain intact in the state could “assist in the perpetuation of a fraud on investors,” records show.
Missouri approved the registration in March 2014. TelexFree applied for it the previous month, according to records.
Those records included a notarized TelexFree affidavit dated Feb. 14 — Valentine’s Day — and signed by “Jim Merrill,” who held the title “Managing Member.” The name and seal of a Massachusetts notary public appear on the document.
Among other things, the document attests that TelexFree is “ready, willing, able, and will comply with all applicable state and federal laws and regulations imposed upon providers of interconnected voice over Internet protocol services.” It also attests that “the Applicant is legally, financially, and technically qualified to provide interconnected voice over Internet protocol services.”
But on April 13, 2014, just weeks after “Jim Merrill” had advised Missouri that TelexFree was “financially” qualified to operate in the state, TelexFree filed for bankruptcy protection in Nevada. (The case since has been moved to Massachusetts.)
In May, Missouri moved to revoke TelexFree’s registration, citing information it had received April 18 from Joseph Isaacs, a TelexFree telecom consultant.
“Mr. Isaacs indicated the affidavit signed by Jim Merrill is not truthful,” a Public Service Commission staffer wrote to the full commission. The staffer recommended revocation of TelexFree’s registration.
Isaacs, according to the staffer’s affidavit, pointed the commission to civil fraud actions against TelexFree filed by the Massachusetts Securities Division and the U.S. Securities and Exchange Commission on April 15, two days after the bankruptcy filing.
By May 9, federal prosecutors had announced the criminal prosecution of TelexFree figures James Merrill and Carlos Wanzeler. The Missouri staffer pointed the commission to a news release by the office of U.S. Attorney Carmen Ortiz on the Merrill/Wanzeler prosecutions for wire-fraud conspiracy.
The Missouri staffer also advised the commission that the FBI and Homeland Security Investigations (HSI), an arm the U.S. Department of Homeland Security, were involved in the TelexFree probe. He also noted that TelexFree itself had acknowledged on its website that service interruptions or discontinuation were possible because “we are not currently in position to support our network.”
The staffer recommended that TelexFree be stripped of its telecom registration. On May 27, the commission gave TelexFree until June 24 to respond to a motion to revoke the registration.
“TELEXFREE did not respond,” the commission said in a July 2 revocation order. The order became effective Aug. 1.
Records in other states show that TelexFree filed a flurry of telecom-registration applications in the weeks leading up to its bankruptcy filing and the exposure of its alleged pyramid- and Ponzi scheme.
URGENT >> BULLETIN >> MOVING: 10th Update 9:18 p.m. EDT U.S.A.) TelexFree figures James Merrill and Carlos Wanzeler have been indicted by a federal grand jury.
The indictment, dated today, includes eight criminal counts of wire fraud and one criminal count of wire-fraud conspiracy.
Among other things, the indictment alleged that Merrill and Wanzeler conspired with each other and with “others known and unknown to the Grand Jury” to fleece TelexFree members.
The indictment describes wire transfers involving Merrill and Wanzeler that began on the day after Christmas in 2013 and continued on Dec. 27.
Here are the alleged wire transfers:
Merrill: Dec. 26. $136,200 from TelexFree Inc. account at Fidelity Co-operative Bank to Merrill.
Wanzeler: Dec. 26. $500,000 from TelexFree Inc. account at Fidelity Co-operative Bank to Wanzeler.
Wanzeler: Dec. 26. $136,200 from TelexFree Inc. account at Fidelity Co-operative Bank to Wanzeler.
Wanzeler: Dec. 26. $158,900 from TelexFree Inc. account at Fidelity Co-operative Bank to Wanzeler.
Wanzeler: Dec. 26. $22,700 from TelexFree Inc. account at Fidelity Co-operative Bank to Wanzeler.
Merrill: Dec. 27. $3 million from TelexFree Inc. account at Fidelity Co-operative Bank to Waddell & Reed Inc., to Merrill.
Wanzeler: Dec. 27. $3 million from TelexFree Inc. account at Fidelity Co-operative Bank to Wanzeler.
Wanzeler: Dec. 27. $3.5 million from TelexFree Inc. account at Fidelity Co-operative Bank to Wanzeler.
Prosecutors from the office of U.S. Attorney Carmen Ortiz of the District of Massachusetts said in a statement early this evening that assets seized in the case so far total about $140 million.
From a statement by prosecutors (italics added):
The indictment also specifies approximately 70 assets to be forfeited as proceeds of the alleged fraud scheme, or assets traceable to such proceeds, including approximately $140,000,000 seized from TelexFree’s accounts and various real assets, such as homes, condominiums, cars and two boats.
Also from prosecutors (italics/bolding/carriage returns added):
According to the indictment, TelexFree, Inc., and TelexFree LLC (collectively, “TelexFree”) provided “voice-over-internet-protocol” (“VOIP”) telephone services that allowed customers to use the Internet to make phone calls. The indictment alleges, however, that TelexFree actually operated as a pyramid scheme, in which its ongoing operations were supported, not by actually selling TelexFree’s VOIP product, but by bringing in a constant stream of new investor dollars.
Between early 2012 and March 2014, TelexFree purported to aggressively market its VOIP service by recruiting thousands of “promoters” to post ads for the product on the Internet. Each promoter was required to “buy in” to TelexFree at a certain price, after which they were compensated by TelexFree, under a complex compensation structure, on a weekly basis so long as they posted ads for TelexFree’s VOIP service.
It is further alleged that over the course of the fraud TelexFree derived only a fraction of its revenue from sales of VOIP service and the vast majority of it from new people buying into the scheme, and so TelexFree was able to pay the returns it had promised to its existing promoters only by bringing in money from newly-recruited promoters. The indictment includes eight charges of wire fraud, based on Merrill, in December 2013, wiring about $10,000,000 in TelexFree funds to personal accounts belonging to him and Wanzeler.
Also see May 27 PP Blog story on SEC allegations about how some of the TelexFree money was dissipated.
UPDATED 6:07 P.M. EDT U.S.A. A U.S. Magistrate Judge issued no immediate ruling today on a motion by TelexFree figure James Merrill to release $4 million to pay for his criminal defense.
Instead, Judge David H. Hennessy will take the matter under advisement and issue an order later, according to the docket of the case. Hennessy heard arguments from both sides today.
When the order would be issued was not immediately clear.
Prosecutors in the office of U.S. Attorney Carmen Ortiz of the District of Massachusetts have contended Merrill isn’t entitled to the money because it belongs to victims swindled in a huge pyramid- and Ponzi scheme.
Merrill, who is charged with wire-fraud conspiracy, is represented by Boston-based attorney Robert Goldstein
BULLETIN: Federal prosecutors handling the criminal case against TelexFree figure and alleged co-owner James Merrill have asked a judge not to release $4 million Merrill says he needs to pay for his criminal defense.
On July 1, Merrill asked for an evidentiary hearing aimed ultimately at securing “an order returning the identified funds” to him.
TelexFree might be the largest MLM HYIP pyramid- and Ponzi scheme in U.S. history, based on global reach, dollar volume and the number of affected recruits. Regulators have called it a cross-border fraud that gathered more than $1.2 billion.
Prosecutors contended today that the “funds Merrill asks the Court to release, however, are investor funds — money victims gave to TelexFree during the course of the alleged fraud.”
The funds were seized via warrants on April 24. Thirty-seven TelexFree-related seizure warrants were applied for that day, after an undercover probe led by Homeland Security Investigations, an arm of the U.S. Department of Homeland Security. TelexFree had declared bankruptcy 11 days earlier. At least five of the seizure warrants were targeted at Merrill accounts holding more than $4.18 million, according to court filings.
In cases involving assets alleged to be forfeitable, prosecutors typically argue that the assets should be preserved until a trial occurs and a verdict on the alleged underlying crime that led to the seizures is returned. If such assets are returned prior to trial, they will be dissipated and thus lost to victims in the event of a finding of guilt.
Beyond that, prosecutors contended, Merrill is not automatically entitled to an evidentiary hearing on the release of the funds and has not made a threshold showing that he lacks access to other funds to pay for his defense.
“[Merrill] fails to submit any evidence in support of his bald assertion that the United States cannot establish probable cause as to forfeitability of the seized assets, and such failure is fatal to his request for a hearing,” prosecutors argued to U.S. District Judge Timothy S. Hillman of the District of Massachusetts.
Boston-based attorney Robert M. Goldstein is defending Merrill.
“[T]he government cannot establish probable cause to believe that the assets in dispute are traceable or otherwise sufficiently related to the crime charged in the criminal complaint,” Goldstein argued on July 1.
Prosecutors asserted today that probable cause to seize the funds already had been established and that Merrill was trying to get a “sneak preview” at the criminal case against him. Merrill currently faces a single charge of wire-fraud conspiracy brought via criminal complaint in May.
A grand jury has been impaneled, which means that other criminal charges are possible. Some TelexFree members have alleged that the company was a racketeering enterprise.
Merrill’s co-defendant in the existing criminal case charging wire-fraud conspiracy is alleged TelexFree co-owner Carlos Wanzeler, described by prosecutors as an international fugitive who first ducked out of the United States through Canada on April 15 and ultimately fled to Brazil. April 15 was the date of a federal raid on TelexFree’s office in Marlborough, Mass.
Prosecutors from the office of U.S. Attorney Carmen Ortiz of the District of Massachusetts are handling the criminal cases against Merrill and Wanzeler.
BULLETIN: (12th Update 9:50 p.m. EDT U.S.A.) In resisting former TelexFree President James Merrill’s latest bid to make bail in the criminal case against him, federal prosecutors said today that TelexFree “has a disturbingly cult-like quality.”
Meanwhile, in separate action in the SEC’s civil case against TelexFree, the agency has accused alleged TelexFree pitchwoman Faith Sloan of lying to a federal judge in a declaration that asserted she did not hear about the TelexFree action until weeks after it had been filed.
Although Merrill attorney Robert Goldstein argued yesterday that TelexFree may have much higher retail-sales numbers than the government believes from its VOIP product — somewhere on the order of $200 million — the office of U.S. Attorney Carmen Ortiz countered today that TelexFree owed $5 billion to its promoters when the scheme collapsed.
Prosecutors also argued that U.S. Magistrate Judge David Hennessy made the right call last month when he ruled Merrill should continue to be jailed.
The “massive amount of revenue the company received between February 2012 and April 2014 did not come from its VOIP product selling like hotcakes, but from an ongoing influx of investor dollars, which it then paid out in commissions.
“Becoming a TelexFree ‘promoter’ cost $340 or $1425, depending on the level of buy-in,” prosecutors continued. “But once someone signed up they were able, for example, to make a guaranteed 200% to 300% annual return on their investment for doing basically nothing and without selling a single VOIP product.”
Merrill knew it was a sham while TelexFree members accorded him “rock star status,” prosecutors contended.
Thousands of promoters “remain fanatically loyal to the company which, despite the bankruptcy and three government enforcement actions, they see as helping hard working people make a little money on the side,” prosecutors argued.
From prosecutors’ argument that Merrill should remain jailed (italics/carriage returns added/light editing performed):
As the government emphasized at Merrill’s detention hearing, understanding the risk of releasing him requires understanding the unique aspects of the TelexFree phenomenon. It is these aspects that ultimately convinced the Magistrate Court that this case is unlike the general run of white collar cases.
First, like many “multi-level marketing” companies, TelexFree has a disturbingly cult-like quality. Egged on by the company itself, promoters spoke of “reaching their dreams” and being “100% TelexFree.” TelexFree’s promoter extravaganzas – in the United States, Brazil and Spain, among other places – were recorded and posted on YouTube. These events had a “boisterous . . . rock concert atmosphere,” at which crowds of promoters cheered James Merrill when he took the stage . . .
Merrill would have the crowd “do the wave.” As the “American face” of TelexFree, crowds of foreign promoters lined up to have their pictures taken with Merrill; his wife conceded that he was “treated like a minor celebrity.” . . . In or about November 2013, TelexFree rented a cruise ship and invited thousands of promoters to join a cruise off the coast of Brazil. Merrill addressed the crowd of (at least) hundreds from the promenade deck, helicopter hovering in the background.
Second, thousands of these promoters do not live in the United States, but in Canada, the Caribbean, and Central and South America . . . Thousands remain fanatically loyal to the company which, despite the bankruptcy and three government enforcement actions, they see as helping hard working people make a little money on the side.
Many TelexFree promoters, at least the earlier ones, made substantial sums from their involvement.
Third, TelexFree itself exists in several foreign countries, including Canada, Brazil, the United Kingdom and the Dominican Republic. According to Canadian corporate filings, Merrill and Wanzeler are the directors of TelexFree Canada . . . the Facebook page for which lists 7,691 “likes” and shows dozens of supportive messages, all written after the bankruptcy and enforcement actions were filed. Merrill and Wanzeler are also the directors of TelexFree’s Dominican entity. This is nothing, however, compared to TelexFree’s presence in Brazil, where thousands of Brazilian promoters took to the streets in June 2013 when the Brazilian government sued TelexFree’s Brazilian entity for running a pyramid scheme.
Even though Goldstein argued yesterday that Merrill — unlike his TelexFree co-defendant Carlos Wanzeler — remained in the United States to face justice after the April 15 raid at TelexFree headquarters, prosecutors asserted that evidence exists that Merrill and Wanzeler were “like brothers.”
Wanzeler, they argued, “has access to substantial funds and has been Merrill’s close friend for 20 years.”
“According to bank records, in February 2013, Wanzeler gave Merrill a check for $865,000, using funds drawn from TelexFree’s Brazilian operations,” prosecutors said. “In December 2013 – around the time he withdrew $3,000,000 for himself – Merrill authorized the transfer of about $7,000,000 to Wanzeler from TelexFree accounts. The real risk here is not Merrill fleeing to Brazil, but Wanzeler helping him from that location.”
And, they continued, “TelexFree has substantial assets overseas. The government has managed to freeze millions of dollars in United Kingdom and Singapore accounts, but various accounts remain unfrozen. There is a TelexFree account in Cayman with the Royal Bank of Canada. It remains unfrozen and the account balance is unknown. Similarly, the government has seized a $10,000,000 cashiers’ check made out to TelexFree Dominicana SRL – TelexFree’s Dominican entity – but no Dominican accounts are frozen. Finally, in or about 2013 Merrill and Wanzeler traveled to Singapore, where we know there are three accounts in the names of TelexFree and Carlos Wanzeler. One of these accounts is frozen, but not the other two.”
Merrill, prosecutors said, had traveled to Brazil four times since 2008, and also has ventured to Spain and Japan.
But TelexFree’s “network of supporters is not just overseas,” prosecutors argued. “[Merrill] knows several TelexFree promoters in the United States who made substantial sums with the company, and would be in a position to assist him.”
These things and more make Merrill a flight risk, prosecutors asserted, noting he potentially faces an effective sentence of life in prison in the United States.
Hennessy, who ordered Merrill jailed last month, already has spoken to these issues, prosecutors contended. From prosecutors, quoting the judge at an earlier hearing (italics added):
There’s evidence, and I certainly think it’s persuasive, that the defendant had a key role in a massive Ponzi scheme. He faces 20 years in jail [on the single charge in the complaint], and there’s something unique to this case that I haven’t really seen in other cases where as a result of his participation in TelexFree, and in the alleged Ponzi scheme, the crime itself has created for the defendant a type of world outside the United States to which the defendant belongs. There are associates outside the United States, including the defendant’s close friend and former business partner, Carlos Wanzeler. There are bank accounts outside the United States, and it’s unclear how much money is in those accounts and whether the defendant has either direct signatory authority over those accounts or has the ability to instruct others to withdraw money from those accounts for the defendant.
“In short,” prosecutors argued, “Judge Hennessy concluded that this was not the usual white collar case essentially because, unlike the usual white collar defendant, Merrill (a) potentially faces life in prison, and (b) should he decide to flee, a preponderance of the evidence shows that he has somewhere to go, and the means to go there . . . As the Magistrate Court found, in several countries there are ‘promoters who may be willing to assist the defendant.’”
And, prosecutors argued, the judge expressed concern not only that Wanzeler could help Merrill flee, but that “Wanzeler might have a more personal stake in Merrill not being available to the government.”
As for Sloan, the SEC said she was playing fast and loose with the truth.
The PP Blog reported on April 25, eight days after news of the lawsuit broke on an international basis, that the SEC asserted it had spoken to Sloan on April 17 and advised her she was being sued. Sloan, the SEC contended, wanted to know back then why the agency was “picking on” her.
Faith Sloan. Source: YouTube.
But Sloan now maintains she first learned of the case in “late May,” according to the SEC.
“The bottom line is simple: Sloan has known about this case since April 17,” the SEC alleged today. “She was told how to get a copy of the Complaint but refused to provide an address where the Commission could serve her pursuant to Rule 4. On May 6, she was served with the Summons, the Complaint, and the April 16 Order. Her assertion —made under penalties of perjury —that she did not hear about the case until late May is a flagrant falsehood.”
UPDATED 11:49 A.M. EDT U.S.A. Katia Wanzeler, the wife of accused TelexFree Ponzi-schemer and alleged fugitive Carlos Wanzeler, no longer is in the custody of the U.S. Marshals Service (USMS). Whether she has concluded an appearance before a federal grand jury in Massachusetts is unclear.
If the appearance occurred, it is possible it was delayed by 24 to 48 hours. Grand jury proceedings are secret.
In a brief statement to the PP Blog late Friday afternoon in response to a question from the Blog Thursday inquiring about Katia’s whereabouts, the USMS in Boston confirmed only that Katia “was in U.S. Marshals custody from May 15-23.”
Carlos Wanzeler, 45, is described as a fugitive by the U.S. Department of Justice. Katia, 49, was arrested May 14 on a material-witness warrant at John F. Kennedy International Airport in New York, and was issued a subpoena to appear before a grand jury on May 21 at 10 a.m., according to court records cited by her attorneys.
On Wednesday (May 21), Katia’s attorneys argued in Massachusetts federal court that their client had not been brought back from New York by USMS to make the scheduled appearance.
Kevin Neal, supervisory Deputy U.S. Marshal in Boston, said late Friday afternoon that “The Marshals Service does not disclose information related to individual prisoners, including details about prisoner transportation, for security purposes.”
The office of U.S. Attorney Carmen Ortiz did not respond to a request for comment.
Katia Wanzeler had been held at a detention center in New York.
In this TelexFree promo, former President James Merrill posed with a giant SUV.
The FBI and the U.S. Department of Homeland Security have established a website for individuals who believe they were defrauded by TelexFree, an alleged pyramid- and Ponzi scheme the Massachusetts Securities Division says gathered more than $1.2 billion.
Alleged TelexFree co-owners James Merrill and Carlos Wanzeler have been charged criminally with wire-fraud conspiracy. Merrill, 53, of Ashland, Mass., is jailed in the United States. Wanzeler, 45, of Northborough, Mass., is alleged to have fled to Brazil. The U.S. Department of Justice describes him as a fugitive.
TelexFree, Merrill, Wanzeler and six other alleged TelexFree managers, executives or promoters also are defendants in a major civil prosecution by the U.S. Securities and Exchange Commission.
By some accounts, TelexFree had between 700,000 and 1.5 million participants.
From the FBI/DHS statement (italics added):
The large number of possible victims necessitates that we ask for your assistance by completing the secure questionnaire online. Your responses are voluntary, but would be useful in the federal investigation and to identify you as a victim.
The office of U.S. Attorney Carmen Ortiz of the District of Massachusetts is prosecuting the criminal cases against Merrill and Wanzeler.
(UPDATED 11:30 A.M. EDT MAY 21 U.S.A. See Update at bottom of this brief, originally published May 20.)
TelexFree figure James Merrill was unable to persuade a federal magistrate judge to free him, the PP Blog has learned.
Judge David Hennessy declined Merrill’s bail application today, the office of U.S. Attorney Carmen Ortiz said moments ago.
Merrill, 53, was arrested and detained May 9 on wire-fraud conspiracy charges. TelexFree co-owner Carlos Wanzeler, 45, has been labeled a fugitive. Wanzeler’s wife Katia, meanwhile, was arrested last week and detained as a material witness.
May 21 update: The Boston Globe is reporting (see Globe Tweet in Comments thread below) that John F. Merrill, the brother of James Merrill, has been subpoenaed by the Massachusetts Securities Division led by Commonwealth Secretary William Galvin. John Merrill is a banker at Fidelity Bank.
See March 9, 2014, PP Blog report. The report references a February 2014 document on file at the Washington State Utilities and Transportation Commission that purported to be a TelexFree LLC “Balance Sheet.” The document lists two accounts at Fidelity Bank and outlines purported TelexFree loans to other TelexFree-related enterprises, including TelexElectric LLLP, Telexfree Financial Inc., TelexMobile and Ympactus.
When the Massachusetts Securities Division filed an action against TelexFree last month, the state alleged that TelexFree financial filings with the Washington State Utilities and Transportation Commission were at odds with information TelexFree had provided the investigators in Massachusetts.
UPDATED 8:14 p.m. EDT U.S.A. James Merrill, the onetime president of TelexFree arrested and detained May 9 on wire-fraud conspiracy charges, was not freed at a bail hearing today and will remain in custody.
“The judge took the matter under advisement,” the office of U.S. Attorney Carmen Ortiz of the District of Massachusetts said early this evening. “Merrill remains in custody until such time” the judge rules on his bail application.
Precisely when the judge intended to rule was not immediately clear. It is believed the ruling will come next week.
Merrill proposed to surrender his passport and to sign over the equity in his Ashland (Mass.) home to secure his appearance at further court proceedings. The Merrill property equity was estimated at $300,000, and Merrill contended he was not a flight risk.
His TelexFree business partner — Carlos Wanzeler — has been labeled a fugitive by the U.S. Department of Justice. An affidavit says Wanzeler ducked into Canada after dark on April 15, the day TelexFree’s offices were raided in Marlborough, Mass. Two days after that, Wanzeler boarded a plane in Toronto and flew to Brazil.
Through his attorney Beverly B. Chorbajian, Merrill said he would not flee.
“Here, the government recites that Merrill is a risk merely because he ‘might’ flee,” Chorbajian argued. “There is absolutely no evidence of any indication that this is the case.”
Merrill’s wife, Chorbajian advised the judge, described him a loving family man with an interest in the community. Merrill, his wife said, has been a youth-baseball coach, a fine son to his mother and a friend who comforted a childhood friend dying of Lou Gehrig’s disease.
“His [C]atholic faith is important to him and has sustained him these past few months through this ordeal,” Merrill’s wife said, according to a defense memo to the judge.
From the remarks of Merrill’s wife as presented the judge (italics added):
He only took more interest in TelexFree because he saw a future with this business in spite of all his frustrations with the way it was being run. He spent countless hours working to make it better – finding consultants to help, consulting attorneys, and so forth. He was so vested in seeing it on the right path. Conspiracy to commit fraud is so far from his intentions and actions.
Repeating a contention in the TelexFree bankruptcy case, Chorbajian argued that Merrill was not part of a plot to hide money. Bankruptcy attorneys argued that cashier’s checks were destined to be placed in a safe-deposit box when found in the possession of former TelexFree CFO Joe Craft.
Nearly $38 million in cashier’s checks were discovered during the April 15 raid of TelexFree’s headquarters. TelexFree had declared bankruptcy two days earlier.
Wanzeler, according to a government affidavit, spent all or parts of three days in Canada prior to flying to Brazil. What he did there remains a mystery.
Maps estimate that it’s a four and a half-hour drive from Northborough, Mass. (where Wanzeler resided) to the Lacolle border crossing through which Wanzeler allegedly entered Canada at roughly 11 p.m. on the date of the TelexFree raid. If the government’s timeline is accurate, it may mean Wanzeler was in Canada for at least an hour on April 15, all day on April 16 and part of the day on April 17. Assuming Wanzeler chose an efficient route, he would have passed through New Hampshire and Vermont prior to arriving at Lacolle.
What he did with time on his hands in Canada is unclear, potentially leading to questions about whether he retrieved TelexFree cash that might have been stockpiled north of the U.S. border. Also unclear is why Wanzeler allegedly chose to fly out of Toronto, roughly six hours from the Lacolle crossing in Quebec. Montreal is much closer to Lacolle.
Toronto is about 281 miles from Lacolle, according to maps. Montreal is only about 41 miles.
TelexFree is alleged to be a combined pyramid- and Ponzi scheme that may have gathered $1.2 billion.
BULLETIN: (6th update 6:10 p.m. EDT U.S.A.) There are reports on Twitter, citing a Boston Globe story, that the wife of accused TelexFree figure Carlos Wanzeler has been arrested at an airport.
The office of U.S. Attorney Carmen Ortiz of the District of Massachusetts confirmed the arrest to the PP Blog at 11:46 a.m., saying “Katia Wanzeler was arrested last evening at JFK Airport [in New York] as she attempted to board a flight to Brazil.”
Katia Wanzeler, Oritiz’ office said, “will appear in federal court in [New York] today for an initial appearance.”
Carlos Wanzeler was charged criminally last week, as was TelexFree figure James Merrill. Court records show that federal undercover agents conducted a probe into TelexFree’s operations. The probe began at least by October 2013.
TelexFree has been described as a combined pyramid- and Ponzi scheme that gathered more than $1.2 billion. The U.S. Department of Justice has labeled Carlos Wanzeler a fugitive.
MLM attorney Gerald Nehra at a TelexFree rah-rah event in California last year. Source: YouTube.
In case you missed the big news yesterday, TelexFree figures James Merrill and Carlos Wanzeler were charged criminally.
Unofficially this brings the number of charged MLM HYIP “programs” (or clients) with links to MLM attorney Gerald Nehra to three in recent years. Nehra was an “expert witness” for AdSurfDaily in 2008. He testified that ASD, a 1-percent-a-day “program,” was a legitimate business and not a Ponzi scheme.
ASD operator Andy Bowdoin, who compared the men and women who guard the President of the United States to “Satan” and the 9/11 terrorists and clucked that “God” * was on his side, later was charged criminally and sentenced to a lengthy term in federal prison.
Nehra was brought in for marquee value and as an adviser to Zeek Rewards, Zeek operator Paul Burks said in late 2011 or early 2012. Zeek executives Dawn Wright-Olivares and Daniel Olivares later were charged criminally. Zeek was a 1.5-percent-a-day “program.”
At some point in 2012 or 2013, Nehra began to advise TelexFree. TelexFree executive Steve Labriola, like Zeek’s Burks before him, also saw marquee value in Nehra, according to Labriola’s comments in a TelexFree promo on YouTube. Now, Merrill and Wanzeler face the prospect of jail. Because the investigation is ongoing, others may, too.
TelexFree’s bogus returns were not tied to sales of its VOIP product and computed to more than 200 percent a year, making the “program” a classic Ponzi- and pyramid swindle, according to court filings. Some promoters claimed $15,125 returned $57,200. One promoter allegedly told an undercover federal agent that he’d scored $1.6 million in TelexFree “without selling a TelexFree product.”
This is a column about willful blindness and feigned obtuseness. (Think Faith Sloan.) It’s also a column about missed signals, whether they’re missed purposely or otherwise. (Think: Why would TelexFree hire Nehra after ASD and Zeek — and why would Nehra ever accept the work, which was bound to lead to racketeering allegations? Put another way, if you’re at the scene of too many highly suspicious fires, you shouldn’t be surprised if serious people start to believe you’re the arsonist or the arsonist’s helper. Even assuming Nehra is no MLM arsonist or racketeer, accepting the TelexFree work potentially put him in the position of being extorted or otherwise abused by the trade’s arsonists and racketeers.)
Spot any common themes or information roadmaps in the quoted material below?
AdSurfDaily “is not” a Ponzi scheme. “It is a legally structured, direct selling business model with multilevel compensation.” — Gerald Nehra, MLM attorney, Aug. 18, 2008. (Context: Nehra’s submitted testimony as defense witness in civil forfeiture action in the $119 million AdSurfDaily MLM HYIP Ponzi case. **)
“[AdViewGlobal] is the next iteration of the Ponzi scheme auto-surf programs, which [are] staffed with former [AdSurfDaily] executives and Bowdoin disciples.” — Class-action attorneys suing AdSurfDaily operator Andy Bowdoin and AdSurfDaily attorney Robert Garner of North Carolina, June 30, 2009. (Context: Motion in member-filed lawsuit against Bowdoin and Garner that alleged RICO (racketeering) violations.)
“With all of our efforts to punish and deter this criminal enterprise, the rights of innocent parties are protected and will subsequently be returned.” — A.T. Smith, assistant director, U.S. Secret Service Office of Investigations, Sept. 26, 2011. (Context: Successful forfeiture actions and remission (restitution) in AdSurfDaily MLM HYIP Ponzi case.)
“We will continue to use every tool at our disposal to bring justice to the citizens defrauded by these insidious schemes.” — Assistant Attorney General Lanny A. Breuer, U.S. Department of Justice, Criminal Division, Sept. 26, 2011. (Context: Successful forfeiture actions and remission (restitution) in AdSurfDaily MLM HYIP Ponzi case.)
“Just having him on retainer and having him on our team, it goes a long way from keeping anybody from launching an attack. Because generally when Gerry Nehra is involved, the Feds know that he’s cleaned up the act really well.” — Paul Burks, Zeek Rewards operator, c. December 2011. (Context: Burks’ remarks to early Zeek members that MLM attorney Nehra was on board.)
“I am pleading guilty because I am in fact guilty of the offense(s) identified in this Plea Agreement.” — Andy Bowdoin, AdSurfDaily operator, May 2012. (Context: Plea agreement to wire fraud in which Bowdoin disagreed with MLM attorney Nehra and acknowledged AdSurfDaily was a Ponzi scheme.)
“Capitalizing on the strength of our financial task force partnerships, we aggressively pursue criminals using computer experts, forensic specialists, investigative experts and intelligence analysts.” — Dennis Ramos Martinez, special agent in charge, U.S. Secret Service Orlando Office, Aug. 29, 2012. (Context: Prison sentence imposed on AdSurfDaily operator Andy Bowdoin.)
“While [Gregory] McKnight himself referred to Legisi as a “loan” program, and demanded that “members” not refer to their “loan” and an “investment,” Legisi was, in reality, an investment contract, which is considered a security and therefore regulated by the Securities and Exchange Commission. This semantic obfuscation was quite obviously an attempt to sidestep the securities laws.” — Office of U.S. Attorney Barbara L. McQuade, Eastern District of Michigan, September 2012. (Context: Sentencing memo against Gregory McKnight in Legisi $72 million HYIP swindle.)
“I’m not sure how many of you have heard the name ‘Gerry Nehra.’ But it is a very big name in this industry.” — Steve Labriola, TelexFree executive, Newport Beach, Calif., July 2013. (Context: Labriola introducing Nehra to TelexFree members at “Super Weekend” MLM rah-rah fest.)
“ZeekRewards used the enormous power of the Internet to rip off $850 million from hundreds of thousands of victims in less than two years. We will continue to work with our law enforcement partners to take down greedy scam artists who think nothing of stealing the savings of hard working people.” — U.S. Attorney Anne M. Tompkins, Western District of North Carolina, Dec. 20, 2013. (Context: The filing of criminal charges in the Zeek Rewards MLM/HYIP case.)
“The Massachusetts Securities Division charged TelexFREE Inc., with running a Ponzi scheme targeting Brazilian-Americans that has raised over $90 million from Massachusetts residents and around $1 billion globally.” — U.S. Department of Homeland Security,April 17, 2014. (Context: U.S. financial infrastructure protection. Sourced from DHS Daily Open Source Infrastructure Report.)
“At this [TelexFree] ‘super weekend’ event, Attorney Nehra spoke at length to attending investors, assuring them of the legality of TelexFree’s operation stating: ‘It is legally designed . . . you are on very solid legal ground.’” — Class-action attorneys, May 3, 2014. (Context: The filing of a prospective class-action against TelexFree and Nehra that alleged RICO (racketeering) violations.)
“Attorney Nehra’s extensive experience in multi-level marketing, and particularly his involvement with the Ponzi schemes involving AdSurfDaily and Zeek Rewards, armed him with the knowledge of what constitutes violations of United States securities law. Indeed, Attorney Nehra was well aware that the use of semantics and obscured phraseology to obfuscate securities laws fails to legitimize TelexFree’s illegal Pyramid Ponzi Scheme.” — Class-action attorneys, May 3, 2014. (Context: The filing of a prospective class-action against TelexFree and Nehra that alleged RICO (racketeering) violations.)
“Investigating the flow of illicit money across U.S. borders and the criminal enterprises behind that money is one of our top priorities.” — Bruce Foucart, special agent in charge, Homeland Security Investigations, May 9, 2014. (Context: Comment on the filing of criminal charges in the TelexFree Ponzi- and pyramid case.)
“As alleged, these defendants devised a scheme which reaped hundreds of millions of dollars from hard working people around the globe.” — U.S. Attorney Carmen Ortiz, District of Massachusetts,May 9, 2014. (Context: Comment on the filing of criminal charges in the TelexFree Ponzi- and pyramid case.)
* Like jailed AdSurfDaily operator Andy Bowdoin, TelexFree figure Carlos Costa contends God is on his side. While Bowdoin talked of “Satan,” one TelexFree promoter has called a prosecutor in Brazil a “blonde she-devil.”
** Two members of AdSurfDaily who went on to become members of Zeek Rewards liked Nehra’s opinion so much they used it in a failed lawsuit (2011) against the U.S. government. The members, Todd Disner and Dwight Owen Schweitzer, both are listed as “winners” in the $850 million Zeek Rewards’ scheme. Disner’s Zeek haul was alleged to be more than $1.875 million.
The staff of the Missouri Public Service Commission raised “grave concerns” that permitting TelexFree’s telecom registration to remain intact in the state could “assist in the perpetuation of a fraud on investors,” records show.
